Shares in chocolates group Thorntons crashed by a third as it became the first British retailer to issue a pre-Christmas profit warning, hit by lower orders from supermarket customers and problems at its new warehouse.
While seasonal items such as chocolate snowmen, Santas, Rudolphs and advent calendars have been selling well, the chocolate retailer has been hit by a “significant” reduction in orders from the major grocers. They also placed their orders later than expected in the run-up to Christmas. This means sales from UK supermarkets will be down in the firm’s second quarter. Thorntons said its 249 own stores are seeing like-for-like sales growth.
The retailer now expects earnings this year to be below the £7.5m pretax profits achieved last year. A survey from advisory firm Begbies Traynor found that up to 135 retailers are in critical condition, with the quarterly rent day looming on Christmas Day. The price battle amongst the big supermarkets has spilled over onto the high street, forcing other retailers to slash prices and squeeze profit margins.
The fall in supermarket orders was compounded by difficulties at Thorntons’ new centralised warehouse, which resulted in lost and late sales with missed promotional slots and reorders. The disruption affected all of Thorntons’ customers, in particular the grocers. Those problems are now behind it, the company said, and the new warehouse will lead to improved capacity.
Chief executive Jonathan Hart, who joined the company in early 2011, has been trying to turn the business around by shifting sales to supermarkets and the website while shutting highstreet stores. Around 50 stores will be closed by the end of 2016. Efforts to revamp the brand have included a new Classics range of chocolates and a new line of toffee and fudge called Nostalgia, as well as advent calendars for adults and an Easter character called Harry Hopalot.
Bang & Olufsen, the Danish maker of sleek hi-fi equipment and televisions, has also warned on profits after experiencing production problems and other supply chain issues.
Thorntons shares hit a low of 77p, but were later trading at 90p, still down almost 25%.
